Among the myriad fiscal responses to the coronavirus pandemic, perhaps none has received more attention in the United States than the federal programs for small businesses. There's good reason.
Small businesses serve as a critical source of economic growth and job creation in the United States, accounting for nearly half of national employment and 43.5% of the nation's gross domestic product, according to the Small Business Administration (SBA). Moreover, it has become clear that small businesses are being disproportionately impacted by the pandemic. Small businesses account for 38% of total business receipts; but in the hard‑hit food and beverage services industry, they account for 65% of the total receipts. Systemic shocks and secular stress created by the pandemic will result in closures of businesses that were otherwise healthy.
In response to the economic pain inflicted by the coronavirus pandemic, the federal government provided small business relief through two separate bills. The landmark Coronavirus Aid, Relief, and Economic Security (CARES) Act funded USD 349 billion in low‑interest loans for small businesses through the Paycheck Protection Program (PPP). With resources rapidly diminished by overwhelming demand, Congress authorized an additional USD 310 billion in a separate bill.
But as attractive as they are, PPP loans have been challenging to administer and implement. The program allows small businesses with fewer than 500 employees or certain franchises the ability to receive loan forgiveness for proceeds, provided 75% of the loan amount is used to cover eight weeks of payroll costs. The balance can finance certain operating expenses such as mortgage interest and utilities. The loan limit is USD 10 million with a fixed 1% interest rate and maturity of two years.
For professional clients only. Not for further distribution.
This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.
It is not intended for distribution to retail investors in any jurisdiction.
This material is issued and approved by T. Rowe Price International Ltd, 60 Queen Victoria Street, London, EC4N 4TZ which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.
© 2020 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.